Intel Wins First Round in Patent Fight That Threatens Chips

Dec. 14 (Bloomberg) -- Intel Corp. won the first round of a
patent-infringement case that some lawmakers said may threaten
jobs at the company’s U.S. manufacturing plants.

The world’s largest semiconductor maker didn’t infringe the
patents of closely held X2Y Attenuators LLC, U.S. International
Trade Commission Judge David Shaw said in a notice posted on the
agency’s website. The next step is a possible review of the
judge’s findings by the full commission, which has the power to
block imports of products if they infringe U.S. patents.

Lawmakers from both U.S. political parties have taken
interest in the outcome, saying a loss for Intel could harm U.S.
jobs. That’s drawn the case into a broader dispute over whether
patent owners that don’t make products should be able to use the
ITC’s import-ban power as a cudgel in fights over licensing
fees.

After workers in the U.S. do initial manufacturing work,
Intel uses plants in other countries for final assembly, leaving
its chips and the products that use them vulnerable to an ITC
import ban. Hewlett-Packard Co. and Apple Inc., which use Intel
chips, are also named in the ITC complaint.

The X2Y patents cover ways to overcome electromagnetic
interference that can damage electronics. The company, which
develops methods for improving the performance of circuits,
licenses its inventions to Samsung Electronics Co., the world’s
biggest maker of computer-memory chips.

No Infringement

Shaw said that Intel didn’t infringe the three patents, and
that two of them are invalid. The judge’s full determination
will come after both sides have a chance to redact confidential
business information.

“X2Y remains confident that the Commission will protect
true innovation regardless of the size of the innovator and will
continue to vigorously enforce its intellectual property against
these infringers,” X2Y said in an e-mailed statement
distributed by an outside spokeswoman, Anne Standley.

Civil suits that X2Y filed in federal court in its hometown
of Erie, Pennsylvania, are on hold pending the outcome of the
ITC case. The commission has set a target date of April 15 to
complete the investigation.

“We are gratified with this result and will continue to
defend ourselves in the case pending in U.S. district court,”
Chuck Mulloy, a spokesman for Santa Clara, California-based
Intel, said in an e-mailed statement.

U.S. Plants

Intel has facilities in Arizona, California, Oregon,
Massachusetts and New Mexico. Congressional delegations from all
those states have written to the ITC. X2Y’s complaint centers on
Intel’s activities at test and assembly plants in Costa Rica,
Malaysia, the Philippines and China.

“X2Y approached Intel over a decade ago and explained how
X2Y’s technology would improve Intel’s products if Intel wished
to take a license,” the company said in a statement on its
website. “Intel did not take a license, but appears to have
adopted X2Y’s technology anyway.”

The ITC, whose job is to protect U.S. markets from unfair
competition, has tightened its standards, requiring patent
owners to have “significant licensing activities,” weeding out
complaints from some with no real business operations. Shaw
found that X2Y had met the threshold requirement of having a
domestic industry worthy of protection.

The case is In the Matter of Microprocessors, Components
Thereof, and Products Containing Same, 337-781, U.S.
International Trade Commission (Washington).